Understanding HOTMA’s Shifting Regulatory Landscape

Over the past several years, the Department of Housing and Urban Development (HUD) has been rolling out updates to Sections 102 and 204 of the Housing Opportunity Through Modernization Act (HOTMA), pushing back deadlines that require affordable housing property managers to pivot in their tenant certification practices.

These provisions of HOTMA impact nearly every federal housing program, including all Section 8 programs, Housing Trust Funds, the HOME Investments Partnership Program, Section 811, and Low Income Housing Tax Credit (LIHTC) properties. Though wide-ranging, the new regulations largely look to update and streamline income and asset calculation and verification requirements, among other things.

For some LIHTC properties, the new regulations are currently in place. For other properties and programs, they have been either postponed or partially postponed. The staggered rollout has created a complicated pastiche of new regulations that apply to some properties or programs and not others, says Samantha Sowards, senior manager of professional services at Nan McKay and Associates, a national consulting firm that specializes in affordable housing compliance.

“Training is key” to successfully navigating the new HOTMA landscape, explains Sowards. “We, in this industry, sometimes do on-the-job training. But we can’t do that with HOTMA. We really need to make sure that folks are trained and know what’s going on.”

In conjunction with this increased focus on training, Sowards also advises affordable housing property managers with LIHTC units to stay in close contact with their state tax credit allocating agencies because they will be able to explain which HOTMA changes are applicable in their states and provide information on compliance deadlines.

A Staggered Rollout Can Create Confusion
HOTMA was signed into law in July 2016. Sections 102 and 104 of HOTMA seek to streamline verification and calculation processes for some HUD programs. They also modify asset and adjusted income regulations for certain programs and may streamline the recertification process for some families.

In February 2023, HUD published a final rule for Sections 102 and 104 of HOTMA, which was to take effect on Jan. 1, 2024. However, that deadline has been extended multiple times, resulting in a staggered rollout within the agency.

In December 2024, HUD’s Office of Public and Indian Housing (PIH) released a notice implementing a phased implementation for PIH programs, with some parts of HOTMA 102/104 applicable July 1 of this year and others applicable at a yet-to-be-determined date. HUD’s Multifamily and CPD offices have each pushed back the compliance deadline for affected programs to Jan. 1, 2026. For LIHTC units, each state allocating agency decides when applicable HOTMA provisions are effective in their state, with some implementing HOTMA as far back as Jan. 1, 2024, and others waiting until Jan. 1, 2026. Property management software firm Yardi recently published a chart breaking down each state’s current application of the HOTMA rules, displaying a patchwork of deadlines between various state agencies.

HUD has attributed the deadline changes to still-needed updates to HUD’s computer systems – namely, the transition from the Public Housing Information Center (PIC) to the Housing Information Portal (HIP) for PIH programs and updates to the Tenant Rental Assistance Certification System (TRACS) for Multifamily programs.

Though software vendors have been working in conjunction with HUD to get these updates rolled out, HUD has indicated that those systems are not yet ready, Sowards says.

HOTMA Changes to Income Limits and Verification
HOTMA makes several changes to income, assets, and other regulations, including an expansion of various types of income exclusions. Examples of these exclusions include changes to the way financial aid and scholarships are calculated for students, and new information on non-recurring income and non-monetary, in-kind donations, such as food, clothing, or toiletries.

In tandem with these updated income rules, HOTMA also seeks to streamline the verification process to reduce the burden on residents and owners and enhance transparency and accountability. Key changes include updated verification hierarchies, expanded self-certification options, and changes to income and asset calculations. 

HOTMA allows for self-certification of assets under certain conditions, potentially reducing the need for extensive documentation. It also requires housing providers to base income calculations for annual reviews on the previous year’s income instead of projected future income in some cases.

Tenants Selection Plans (TSPs) and PHA policies must be updated to reflect HOTMA’s changes.

All of these changes also require updates to tenant and management forms, as well as updates to software systems. Management staff also need to be trained in the new requirements, and residents need to be educated about the changes.

Blended Properties Face Challenges
Sowards says some state allocating agencies are holding off on implementing HOTMA at LIHTC properties, while others are requiring some form of HOTMA implementation, creating dueling deadlines for some blended properties with both LIHTC and PIH units.

Further, not all provisions of HOTMA that are applicable to PIH or Multifamily programs are also applicable to LIHTC units. “This could be an issue for folks with blended properties,” she says. “Some people aren’t aware of exactly what’s effective and when, because it varies by program and it’s changed over time.”

In addition, over the last few years, HUD and state allocating agencies have, for some programs, moved from the Uniform Physical Condition Standards (UPCS) to the National Standards for the Physical Inspection of Real Estate (NSPIRE) standard for property inspections. Those changes have already been implemented in public housing and multifamily housing programs and will soon be used for tenant-based and project-based voucher programs as well.

In addition to creating compliance challenges for owners of blended properties, these staggered deadlines and different requirements can be challenging for affordable housing companies with properties in several states, because deadlines and requirements may be different depending on the state. “For property management companies that operate in one state, it’s likely a lot easier than for companies that operate in multiple states,” Sowards says. Though that has always been the case, Sowards emphasizes that HOTMA changes can add to the complexity.

“If you’re a company that has in-house compliance, you always need to make sure your compliance staff are savvy and up to date on regulatory changes,” Sowards says. “HOTMA means they really need to get trained and stay up-to-date, and they need to be disseminating information to site staff regularly.”

Sowards expects state allocating agencies and HUD to be somewhat lenient in enforcement of HOTMA in the initial years during compliance audits, asking housing providers to correct errors going forward and working with them to implement the new rules.

She suggests housing providers stay in close contact with state allocating agencies and monitor communications from HUD regularly. She also emphasizes that they shouldn’t hesitate to ask questions or seek clarity. HUD’s email for questions for PIH programs is [email protected]. For Multifamily programs, it’s [email protected].